Natalia Shagaida: “Targeted Aid May Help Fight the Inflation”

As noted in the position paper “Price Adjustment: When to Stop?” published at the website of the RF Central Bank, targeted aid to people in need is more efficient than adjustment of food prices. Natalia Shagaida, Head of the Agrarian Policy Department, Gaidar Institute holds the same view.

According to analysts of the RF Central Bank, targeted aid is one of the inflation-fighting measures because direct adjustment of prices only slows down their growth for a while and may affect the economy. As stated in the document in question, adjustment of prices at the government level creates imbalances on goods markets and may lead to negative outcomes for regulated industries in general. It is pointed out in the document that “such implications can be seen in terms of contractions in investments in production and shrinkage of output of goods which prices are adjusted.” “Concurrently, risks associated both with shortages and growth in the shadow economy increase and so do the government’s costs related to the fight against it,” the authors of the document believe.

According to Natalia Shagaida, people react more to falling incomes, rather than price rises. The instrument, which the RF Central Bank refers to, distorts the market in the least. Our Center holds the same view,” the expert told Agroinvestor. Natalia Shagaida noted that 10% of the population spent on food up to 53% of consumption expenditures and still could afford only 66% of dietary intake levels. “The needs can be determined, depending on the level of consumption which the government believes to be appropriate for the most vulnerable groups,” the expert said.